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The military industry of Egypt is the most important in the Arab world. State-owned enterprises, under control of the Armament Authority headed by a major general, are the main domestic producers of Egypt's defense systems. The Armament Authority was responsible for selecting, developing, and procuring military systems. Acting on behalf of the military's branches, the authority assigned production to domestic factories or contracted with external suppliers. The National Organization for Military Production within the Ministry of Military Production supervises a number of manufacturing plants, which were usually named after their location.
U.S. military aid finances most of Egypt's big-ticket defense procurements — $1.3 billion annually for several years. Large projects underway include the M1A1 Abrams tank manufacturing facility, M88A2 coproduction program, IFF, the HAWK rebuild program, and Peace Vector V. Such projects can be expected to continue, although improvements to and maintenance of existing force capabilities are perhaps more likely targets of future spending than entirely new systems.
As early as 1949, Egypt unveiled plans to develop an armaments industry with the industrial base that emerged during World War II when British and American forces placed orders for equipment. Additionally, as WWII had come to a close, Egypt found itself in possession of a large quantity and assortment of weaponry left behind by Nazi Germany and others. In particular, Egypt possessed large stockpiles of 8mm Mauser ammunition that had been manufactured by a number of countries (Germany, Turkey, Greece, etc.) Egypt decided to manufacture a semi-automatic main battle rifle, and so purchased the tooling and plans for the Swedish Ag m/42 rifle. They reengineered this rifle to use the 8mm Mauser cartridge and added a gas adjustment valve. This rifle was called the Hakim, and Egypt manufactured and fielded it from the early 1950s until about 1961. They also briefly manufactured another reengineered Ag m/42, this time chambered for the 7.62×39mm Soviet cartridge, called the Rasheed. These guns were replaced in the 1960s by the Maadi AK-47 a licensed copy of the widely distributed Soviet automatic assault rifle.
During the late 1950s Egypt built the Jabal Hamzah ballistic missile test and launch facility to test-fire and experiment indigenously built Al Zafir and Al Kahir SRBMs.
Egypt entered into a number of joint venture projects to produce European-designed aircraft. The most successful of these led to the Al Gomhuria basic flight trainer, of which about 200 were eventually made. In 1962, Egypt undertook a major program with the help of West German technicians to design and build a supersonic jet fighter Helwan HA-300, but the government terminated the project because of financial strains caused by the June 1967 War.
During the 1970s and 1980s, Egypt expanded and diversified its production of arms to achieve partial self-sufficiency and to develop an export market in the Middle East and Africa. In addition to manufacturing small arms and munitions, Egypt had begun producing or assembling more advanced weapons systems through licensing and joint venture agreements with companies based in the United States and Western Europe. Egyptian technicians and scientists developed several indigenous weapons systems.
Egypt was involved in supplying the CIA with various weapons for Operation Cyclone and the Soviet Afghan war. Officer Gust Avrakotos managed to set up a deal with Abd al-Halim Abu Ghazala for Egypt to manufacture .303 ammunition for the hundreds of thousands of Lee–Enfield rifles the CIA had supplied to the Mujahideen through Pakistan's ISI. Congressman Charlie Wilson (close with Avrakotos) helped grease the political wheels for the deals to go through.
The main purchaser of Egyptian defense products at the time was Iraq. In the early 1980s, Iraq was desperate to replace Soviet military equipment lost during the early stages of the war with Iran. Iraq blunted Iranian attacks with the Saqr 18, the Egyptian-made version of the Soviet BM-21 122mm multiple rocket launcher.
Egypt has also sold a smaller volume of weapons to Kuwait and other Arab States of the Persian Gulf. In 1988 Kuwait was reported to have ordered about 100 Fahd armored personnel carriers; Oman and Sudan ordered smaller quantities of these carriers.
The Arab Organization for Industrialization supervises nine military factories which are producing civilian goods as well as military products. Initially the owners of AOI were Egypt, Saudi Arabia, and the United Arab Emirates, before both countries gave back to Egypt their shares in 1993, valued at $1.8 billion. AOI now is entirely owned by the government of Egypt. AOI has about 19,000 employees out of which are 1250 engineers. AOI fully owns 6 factories and shares in 3 joint ventures, beside the Arab Institute for Advanced Technology.
The National Service Products Organization operates three companies that manufacture military and civilian products. NSPO also provide contracting services.